Extracted from Annual Report 2021
Dear Fellow Shareholders,
On behalf of the Board of Directors (the “Board”), I am pleased
to share that Sunpower achieved a resilient performance in the
financial year ended 31 December 2021 (“FY2021”) despite
cost pressures on the GI projects' production operations from
surging feedstock prices amidst the continuous across-the-board increases in commodity prices during the year. Following
the disposal and deconsolidation of the M&S business on 30
April 2021, the Group recorded revenue of more than RMB3.4
billion and group PATMI without financial effects of CBs of
RMB435.8 million1 in FY2021, up 15.6% YoY. Group underlying
operating cash flow was a robust RMB244.3 million.
Disposed M&S Business To Strategically Focus On GI, Unlock Value And Improve Investment Returns For Investors
During 2021, the Group disposed its M&S Business at an
attractive consideration of RMB2.29 billion. A major portion
of the net proceeds was paid as a Special Dividend to
shareholders and bondholders in recognition of their support
and to improve their investment returns. The Special Dividend
was paid in two tranches of RMB0.6794 (S$0.1406)2 and
RMB0.4833 (S$0.1006)3 per share on 18 June 2021 and 21
July 2021 respectively, for a total of RMB1.1627 (S$0.2412)
Growing the GI business has been the strategic direction for Sunpower since 2015 and the disposal of the M&S business has now enabled it to strategically focus even more on the GI business, which owns and operates a sizeable and valuable portfolio of centralised plants that supply clean steam to industrial parks, sell clean electricity to the State Grid and provide clean heating to residential households on long-term (typically 30 years) exclusive supply concessions.
The Group's adaptable and reliable business model combines the circular economy zero-waste resource utilisation model and leading technologies to form a strong competitive moat. As the pioneer in the development of centralised circular economy infrastructure, such as the Shantou Project which received incentives from the central government for air pollution and control, the Group has a strong supplier role in the provision of steam, a non-discretionary production input, to industrial users. In addition, it is able to increase its geographical reach to achieve economies of scale with its long-distance steam transmission pipeline technology. Through the application of advanced technologies, including environmental protection, energy-saving and blended combustion of sludge technologies, Sunpower consumes the treated sewage water and combusts the sludge in the industrial parks, as well as converts its polluted matters into useful products and sells them to the local factories, thus keeping the resources recycled within a closed loop and increasing economic benefits. As a result, the Group provides innovative solutions to the government and the industrial parks that help them to achieve ultra-low emissions.
With the vigorous promotion of the development of circular economy industrial parks, including centralised steam facilities4, by the NDRC as part of the “14th Five-Year Plan”, Sunpower's growth strategy is strongly aligned with national environmental policies. To-date, the Group has successfully established a sizeable portfolio of 9 projects in operation, 1 in trial production and 1 under construction. With their exclusive concessions or natural defacto exclusivity, and diverse and captive end-users in the industrial parks that are located in economically-vibrant provinces, the GI Projects are expected to generate recurring income and cash flows for the Group over the long-term.
GI Business Recorded A Resilient Performance Despite Challenges
Sunpower's GI business saw robust demand for steam by
industrial customers continue unabated in FY2021. Total
steam sales volume grew 45.2% YoY to a record high of 7.93
million tons, a firm testament to its leading position as an
industrial steam supplier in China.
Consequently, GI recurring revenue5
rose 53.3% YoY to RMB2,047.3 million in FY2021, driven by the
ramp-up of highquality GI projects including Shantou Project Phase 16. Despite
the extraordinary rise of feedstock prices in 2021, the Group's
strong operational management capabilities, implementation
of mitigation measures and the price formation mechanism
that links the cost of feedstock to the price of steam have
allowed the Group to keep GI recurring EBITDA7
robust at RMB466.2 million, while GI recurring PATMI8
stayed positive at RMB135.7 million. GI operating cashflow9
grew 43.4% YoY to RMB270.6 million, which continues to demonstrate the GI
projects' ability to generate strong recurring cashflow10. As
the GI projects are still ramping up, the long-term Net Present
Value (“NPV”) of future cashflows generated by the Group's GI
business is expected to be substantially higher than the latest
period.11 I wish to thank the disciplined management team for
all their tireless efforts and hard work that went into achieving
this resilient performance.
Further, solid progress continued to be made on the expansion of the GI project portfolio. Xintai Zhengda Project Phase 1 has added two more boilers to complement the first biomass boiler that has been ramping up since 4Q 2020, one boiler of Shantou Project Phase 2 is now in trial production and the Group is working hard to bring other boilers online as soon as possible to meet the strong demand, Tongshan Project has commenced trial production and Shanxi Xinjiang Project is expected to start operations in 2022. Shantou Project Phase 1 is in full operation to meet strong steam demand from 128 qualified companies that have substantially moved into the industrial park, Changrun Project started steam supply to new customer Sanli in May 2021, and construction of the city heating network system of Xinyuan Plant has been completed with heat supply planned to start in the heating season of 2022. These new and expanded projects can be expected to lead to higher recurring income and cash flows for the Group that will improve the investment returns of the GI portfolio.
Focused on Sustainable Development That Improves Shareholders' Value Over The Long Term
As we press ahead, the Company's focus will be firmly on a
sustainable development path that improves shareholders'
value, and to continue to execute a two-pronged strategy that
emphasises the quality of development. The Group will further
enhance existing GI projects to achieve even higher quality
growth, which will further boost their investment returns and
asset value in the long term. In addition, it will also tap into its
proven ability to identify and invest in additional promising GI
projects that meet the investment hurdles of the Company.
Coupled with an experienced, dedicated and disciplined
management team in place to provide high quality leadership,
as well as multiple potential sources of funds, the Group
believes it is in a favourable position to continue to execute
its growth strategy and prepare for the next chapter of
Guo Hong Xin